What is a Switch Bill of Lading and when and why is it used?

The world of shipping and freight is very dynamic, and several changes happen in the course of processing a shipment.

Destinations can change, routing can change, cargo release parties can change, and even important documents such as the Bill of Lading may be subjected to changes.

Some may be simple amendments, but in some cases, customers may request the issuance of a Switch Bill of Lading. This article clarifies what a Switch Bill of Lading is and when and why it is used.

Before we look at what a switch bill of lading is, let’s review the types of bills of lading and how these are issued.

There are only 3 ways in which a bill of lading/transport document may be issued

1) A B/L issued in Original(s) to a “named” consignee is referred to as a “Straight B/L.” A straight B/L is a NON-NEGOTIABLE & NON-TRANSFERABLE DOCUMENT.

2) A transport document issued to a “named” consignee without any originals is considered a “Sea Waybill“. This is a NON-NEGOTIABLE & NON-TRANSFERABLE DOCUMENT.

3) A B/L is issued in Original(s) and consigned “TO ORDER” or “TO ORDER OF SHIPPER” or “TO ORDER OF XYZ BANK” is termed as a “Negotiable B/L or Order Bill“.

A bill of lading has 3 functions as below, and each of the above types of bill of lading fulfills one or more of these functions.

1. Evidence of Contract of Carriage
2. Receipt of Goods and
3. Document of Title to the goods

What is a Switch Bill of Lading?

A “Switch” bill of lading is NOT another type of Bill of Lading.

A Switch Bill of Lading is simply the second set of bills of lading that may be issued by the carrier or their agent “in exchange for” or “substituting” the full first set of bills of lading originally issued when the shipment was effected.

The KEYWORD here is “in exchange for” or “substituting“. This clearly implies that the second set of bills of lading cannot be issued while the full first set is still in circulation and active.

Why do customers require a Switch bill of lading?

Switch bills of lading may be requested or required for a few different reasons.

• When there has been a change in the original trading conditions;
• Goods have been resold (probably high-seas sale), and the discharge port has now changed to another port;
• The seller (who could be an intending agent) does not wish the name of the actual exporter to be known to the consignee in case the consignee strikes a deal with the exporter directly;
• The seller does not want the buyer to know the actual country of origin of the cargo, so he requests that the port of loading be shown as some port other than the one the cargo was loaded from.

What can and cannot be changed in a Switch Bill of Lading?

In my view, the only area that is allowed to be changed in the switch bill of lading is the shipper, consignee, and notify_party information, which is usually displayed in what I term as Part 1 of the bill of lading.

TT Club, however, considers that the below additional elements/information can be changed, provided that the new information is true and correct and does not affect the carriage and delivery.

• the shipper’s description of the goods;
• the name of the ship (if necessary);
• the place and date of issue of the bill of lading;
• the freight and the port of discharge

The club suggests that written confirmation should be obtained from the client who is requesting the switch, setting out the requirements for the new bill of lading in detail.

Where the changes in the details of the cargo are significant, evidence to support the changes, and an indemnity from the client should be sought to protect the issuer in the event of a dispute with the consignee.

The below details should never be allowed to be changed in a Switch Bill of Lading

• place and date of shipment. Changing this could affect the terms of delivery based on the sales contract
• details of cargo including the number of packages, dimensions, weight, and measurement
• hazardous cargo information, if any (remember cargo is already on board based on original hazardous cargo declaration)
• reefer cargo information such as temperature setting, humidity settings, etc. (remember cargo is already on board based on original cargo declaration)
• OOG Cargo information, if any (remember cargo is already on board based on original OOG details declared including lost slots calculation, etc.)
• none of the original clauses on the bill of lading

Where can a bill of lading be switched, and who can request the carrier to issue a switch bill of lading?

Depending on the carrier, a bill of lading may be switched anywhere in the world as long as they have offices or agents.

For example, in a shipment from New York to Antwerp, the bill of lading may be switched in London as long as the carrier in question has offices or agents in London. It is normal that a switch bill of lading may be requested at a location that may not be on the route of the cargo.

Is the issuance of a Switch Bill of Lading legal?

There is no ruling that says specifically that the issuance of a switch bill of lading is illegal (unless there is willful intent to commit fraud).

However, it seems to be the concerted view of almost all insurance companies that a switch bill of lading issued with any misrepresentation or information contrary to the first set issued, without the express acceptance and understanding of the buyer, is a fraudulent document.

To protect themselves from any possible claims, the carrier/agent has to ensure that

1. They are covered by their insurance for the issuance of such switch bills of lading, and they provide their insurance company with the exact reason for the issuance.
2. They need to ensure that the bill of lading is switched before the handover of cargo and also that the person or entity requesting the switch bill is authorized to make the request.
3. If a negotiable bill is issued, generally the shipper on the bill of lading has the right to request the switch bill of lading, but only before the endorsement to the next party or delivery of the goods.
4. All issued originals from the first set of bills must be returned to the carrier and canceled before the bill is switched and a second set is issued.
5. Point 4 is perhaps the most important point for the carrier to note and ensure, as this is the only way to guarantee that no other originals are floating around for the same shipment. The dangers of two sets of original bills in circulation for the same cargo are many.
6. If the first set of originals is issued as an order or negotiable bills and those are endorsed at the time of switching, the carrier must ensure that the party making the request is the last authentic endorsee in the chain and has rights to its further disposal.
7. A carrier’s agent should never issue a switch bill of lading of their own volition based on the request of the customer and must always issue it only with the written authority of the principal (carrier).
8. The switched set should not contain any information different from that of the first set of bill of lading (like an incorrect port of loading or a change in the condition and quantity of the cargo).
9. If switch bills contain any misrepresentations, the carrier/agent will be at risk of claims from parties who have suffered a loss because of such misrepresentations.
10. If the agent has been asked by the principal to issue the switch bill of lading based on an indemnity from the customer, the agent should ensure to get the wording format from the principal and get the completed indemnity approved by the principal before issuing the switch bill of lading.

source: https://www.shippingandfreightresource.com/